Posts Tagged ‘economics’

The Razor King

February 2, 2015

Anyone who shaves on a regular basis owes King Camp Gillette a debt of gratitude. King Camp Gillette, yes that was actually his name, was the founder of the Gillette Safety Razor Company in 1901 and the inventor of the disposable safety razor. Before this invention, men  shaved using a straight razor that had to be sharpened on a leather strop. These razors were expensive, needed sharpening often and were not especially safe or easy to use. There had been attempt to create safety razors out of forged steel in the nineteenth century but they were also expensive and hardly disposable.

English: Front page of Gillette's razor patent.

English: Front page of Gillette’s razor patent. (Photo credit: Wikipedia)

King Camp Gillette  was a salesman for the Crown Cork and Seal Company, which made bottle caps for soft drink bottles, and he noticed that people would throw away the bottle caps after opening the bottles. He thought that if bottle caps could be disposable, why not razors? Working with two machinists, Steven Potter and William Emery Nickerson, Gillette designed a cheap, disposable safety razor using stamped steel. The razor was an immediate success and since Gillette’s portrait was on the packets of the razor blades, he became recognizable all over the world. Gillette’s big break come with America’s entry into World War I. Gillette contracted with the government to provide razor kits for American servicemen. Despite his success, King Camp Gillette died in poverty in 1932. He lost control of his company to a fellow director, John Joyce, though the company retained the Gillette name. Gillette spent much of the money he gained from the sale on property and when the Great Depression struck, the shares of the company lost their value.

King C. Gillette

King C. Gillette (Photo credit: Wikipedia)

The Story of King Camp Gillette could be read as a great American success story or a rags to riches to rags story. What I find most intriguing about Gillette, however, are his social and political views. The Wikipedia article about Gillette describes him as a “Utopian Socialist” who wrote a book in 1894, advocating that industries should be nationalized and controlled by a single corporation owned by the public. It may seem incongruous for a capitalist to argue for socialism, but Gillette believed that capitalists were the natural choice to run the nationalized industries, since they already had the necessary experience. Gillette, then was a democratic socialist rather than a Marxist. He wanted a socialism that benefited everyone in the nation, not a class struggle and revolution.
Gillette’s views may seem radical, but this kind of democratic, corporatist socialism was very popular at the time. In 1888, Edward Bellamy (cousin of the Francis Bellamy who had devised the Pledge of Allegiance) had published a utopian novel titled Looking Backward, in which a man from 1887 falls asleep Rip van Winkle style and wakes up in the socialist utopia of 2000. In his novel, Bellamy had advocated the same sort of corporatist socialism as Gillette and many others. Looking Backward was a best seller and almost immediately after its publication “Nationalist” clubs sprang all over the country hoping to enact such policies. Ultimately some form of this National Socialism was adopted by Benito Mussolini in Fascist Italy and certain aspects of Franklin Roosevelt’s New Deal.

I have to wonder how otherwise intelligent men could imagine that creating a publicly owned monopoly to control an entire nation’s industry could possibly be a good idea or, in any way compatible with any idea of a free country. One of the major concerns of the late nineteenth and early twentieth centuries was the growth of monopolies and trusts owned by such men as John D. Rockefeller or Andrew Carnegie. Many observers believed that such men practiced unfair and anti-competitive policies which gave them a disproportionate influence over the American economy and ultimately of the government. It seemed obvious that economic power should not be concentrated in the hands of a few men. Why then, was the solution to this concern considered to be the concentration of economic, political, and legal power in the hands of a few. The National Corporation that Gillette and others envisaged would be owned by the public, but the public wouldn’t be administrating the corporation on a daily basis. There would have to be some sort of committee of directors with perhaps a sort of CEO. Such directors would have far more control over the economy and the government than any private businessman. They would effectively own the whole country, even if nominally it was owned by the public. Even the most benevolent saint would be tempted to abuse such power, to benefit his friends, and the people who would aspire to such positions would not likely be saints.

I have similar reservations about the people who seem to believe that a bigger, more expansive government is the solution to all the nation’s problems, the sort of people who are always proposing new laws and regulations believe that a new government program is always the answer. I can understand that giving more power to the state will allow it to do more good for everyone, but why can they not see that it will also allow the state to do more evil. Given the defects of human nature, which inclines more to evil than to good, my personal preference is to leave the good undone rather than risk the evil that will certainly be done.

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The Paradise of the Real

April 26, 2014

That is the title of  an article by Kevin D Williamson at National Review Online that should be required reading for anyone who has ever had a discussion about economics with a liberal. I can’t even begin to express how informative this article is and can only provide a few excerpts. You really have to read it all.

Word Problem No. 1: It’s lunchtime for Mrs.Piketty’s second-grade class. Bobby has 20 GummiWorms, and Jenny has 20 SweeTarts. Bobby and Jenny both like Gummi Worms and SweeTarts, but both like SweeTarts a little bit more, so Jenny trades three of her SweeTarts for four of Bobby’s GummiWorms. Both are happy with this trade, so they do it again. Question: How many pieces of candy do the two students end up with for dessert?

Word Problem No. 2: Mrs. Piketty is unhappy with the inequality in her second-grade classroom. Jenny’s 20 SweeTarts are valued much more highly than are Bobby’s 20 Gummi Worms, trading at a rate of 3:4. To even things out, Mrs.Piketty gives Bobby a voucher for seven SweeTarts. Question: How many pieces of candy do the two students end up with for dessert?

Word Problem No. 3: Mrs. Piketty’sattempt to solve the problem of inequality in her classroom has yielded unsatisfactory results. Bobby has his 20 Gummi Worms, and Jenny has her 20 SweeTarts, and SweeTarts still trade for Gummi Worms at a rate of 3:4. So Mrs. Piketty enacts some new policies. First, she hires Bobby as a hall monitor and decrees that hall monitors receive a minimum income of at least ten SweeTarts or the equivalent value in Gummi Worms. Also, she decrees that the high price of SweeTarts — three of them cost four Gummi Worms — is oppressive, but she’s not an all-the-way-to-the-wall outright red, either, more of a social-democrat type with a subscription to The Nation, so she simply enacts some counteracting price supports for Gummi Worms, decreeing that they cannot be traded at a price less than 13/15th of a SweeTart. She enlists Mrs. Yellen from the next classroom over to provide zero-interest financing for the purchase of up to fiveSweeTarts per lunch period, increases Bobby’s voucher allowance to nineSweeTarts per lunch period, and offsets that on her budget with a “fairness” tax of two SweeTarts per lunch period on Jenny, who is the sole member of her tax bracket. Question: How many pieces of candy do the two students end up with for dessert?

Answers: (1.) 40; (2.) 40; (3.) 40. There are only 40 pieces of candy, and rules, vouchers, taxes, zero-interest loans, redistribution, and mandates do not magic more pieces of candy into existence. If Jenny does not like the trading price imposed by Mrs. Piketty, she can keep all of her SweeTarts, while Bobby gets none. If Mrs.Piketty sends out her second-grade tactical SWAT unit to seize Jenny’s SweeTartsand put some serious asset-forfeiture and social-by-God-justice up in her smug little1-percenter face, Jenny can still leave her SweeTarts at home, eating them before or after school, and maybe even save them up in the hopes that her third-grade teacher next year will not be a howling moonbat.

Forty is forty is forty, 10 times 4, 8 times 5, 6.32455532034 squared, 23 plus 17. You can set the trading ratio of apples to oranges however you like, but if you have 20 of each, you have 40 pieces of fruit at any price — and the only way to bring more of it into the world is to plant trees, cultivate them, and pick the fruit.

The whole of progressive economics, as well social policy is to deny that two plus two equals four. Naturally the person who insists that two and two make four is a racist, bigoted, homophobic, sexist hater.

Here is something for those concerned about  increasing income inequality.

Measured by money, things look relatively grim for the American middle class and the poor. Men’s inflation-adjusted average wages peaked in 1973, and inflation-adjusted household incomes for much of the middle class have shown little or no growth in some time. The incomes of those at the top of the distribution (which is not composed of a stable group of individuals, political rhetoric notwithstanding) continue to pull away from those in the middle and those at the bottom. The difference between a CEO’s compensation and the average worker’s compensation continues to grow.

But much of that is written into the code. If, for example, you measure inequality by comparing the number of dollars it takes to land at a certain income percentile, with a hard floor on the low end (that being $0.00 per year in wages) but no ceiling on the top end, and if you have growth in the economy, then it is a mathematical inevitability that incomes at the top will continue to pull away from incomes at the bottom, for the same reason that any point on the surface of a balloon will get farther and farther away from the imaginary fixed point at its center as the balloon is inflated. 

The rich are getting richer but the poor are also getting richer. What people are complaining about amounts to the fact that the rich are getting richer faster than the poor. That may be a concern but it is not true that the rich are getting richer by stealing from the poor. When the economy grows, everyone benefits, some more than others but I would be wary of killing the goose that lays the golden eggs by pursuing policies of redistribution.

With economic models, we are a little like Neo in The Matrix, before he takes the red pill: We are not in the real world, but in a simulacrum of it, one that has rules, but rules that can be manipulated by those who understand the code. Economic models and analysis are very useful, but it’s worth taking the occasional red-pill tour, leaving behind the world of pure symbolism and taking a look at the physical economy.

That is an important point to remember.

The physical economy — the world of actual goods and services — looks radically different from the symbolic economy. Measured by practically any physical metric, from the quality of the food we eat to the health care we receive to the cars we drive and the houses we live in, Americans are not only wildly rich, but radically richer than we were 30 years ago, to say nothing of 50 or 75 years ago. And so is much of the rest of the world. That such progress is largely invisible to us is part of the genius of capitalism — and it is intricately bound up with why, under the system based on selfishness, avarice, and greed, we do such a remarkably good job taking care of one another, while systems based on sharing and common property turn into miserable, hungry prison camps.

We treat the physical results of capitalism as though they were an inevitability. In 1955, no captain of industry, prince, or potentate could buy a car as good as a Toyota Camry, to say nothing of a 2014 Mustang, the quintessential American Everyman’s car. But who notices the marvel that is a Toyota Camry? In the 1980s, no chairman of the board, president, or prime minister could buy a computer as good as the cheapest one for sale today at Best Buy. In the 1950s, American millionaires did not have access to the quality and variety of food consumed by Americans of relatively modest means today, and the average middle-class household spent a much larger share of its income buying far inferior groceries. Between 1973 and 2008, the average size of an American house increased by more than 50 percent, even as the average number of people living in it declined. Things like swimming pools and air conditioning went from being extravagances for tycoons and movie stars to being common or near-universal. In his heyday, Howard Hughes didn’t have as good a television as you do, and the children of millionaires for generations died from diseases that for your children are at most an inconvenience. As the first 199,746 or so years of human history show, there is no force of nature ensuring that radical material progress happens as it has for the past 250 years. Technological progress does not drive capitalism; capitalism drives technological progress — and most other kinds of progress, too.

Read those last paragraphs over and over until you get it. We are living in an age of unprecedented peace and prosperity. A lot of people have come to believe that this is the norm. It is not. The norm is poverty and misery. There is a lot more here on this but I will skip ahead a little.

For the conservative, people are anasset — in the coldest economic terms, a potentially productive unit of labor. For the progressive, people are aliability — a mouth to be fed, a problem in need of a solution. Understanding that difference of perspective renders understandable the sometimes wildly different views that conservatives and progressives have about things like employment policy. For the conservative, the value of a job is what the worker produces; for the progressive, the value of a job is what the worker is paid. Politicians on both sides frequently talk about jobs as though they were economic products rather than contributors to economic output, as though they were ends rather than means. The phrase “there aren’t enough jobs” is almost completely meaningless, but it is a common refrain.

Remember all the talk about overpopulation that was popular a couple of decades ago. The people who worry about that sort of thing see people only as blind consumers, stomachs that need to be fed. The truth is that a more people is a net asset since each person has two hands that can work and a brain that can think.

This next part is great.

For example, The Nation yesterday published a hilariously illiterate essay by Raúl Carrillo, who is a graduate student at Columbia, a Harvard graduate, and an organizer of something called the Modern Money Network, “an interdisciplinary educational initiative for understanding money, finance, law, and the economy.” All three of those institutions should be embarrassed. Mr. Carrillo is the sort of man who thinks that 40 pieces of candy can be divided and recombined in such a way as to arrive at a number greater than 40. His essay, “Your Government Owes You a Job,” argues that the federal government should create a guaranteed-job program, “becoming our employer of last resort.” Mr. Carrillo’s middle-school-quality prose must be read to be appreciated — “Would jobs for all skyrocket wages and prices, spurring inflation? Such unfounded belief holds the jobless hostage to hysteria” — but his thinking is positively elementary. It does, however, almost perfectly sum up the symbolism-over-literal-substance progressive worldview: “You need dollars to eat,” he writes, “and unless you steal the dollars, you generally have to earn them.”

But you do not need dollars to eat. You need food to eat. Experiment: Spend six months locked in room with nothing other than a very large pile of dollars; measure subsequent weight loss.

I sometimes hear commercials on the radio and on the internet stating that the economy is due to collapse and therefore I should buy gold. If we end up in a sort of Mad Max style post-apocalyptic society, gold is going to be completely useless. You can’t eat gold. A dollar bill is just a piece of green paper. It is the goods and services that the dollar can buy that is important. Don’t confuse wealth with money.

Mr. Carrillo’s intellectual failure is catastrophic, but it is basic to the progressive approach. Mr. Carrillo argues that a guaranteed-job program would “pay for itself,” mitigate deficits, empower women, strengthen communities, liberate us from Walmart and McDonald’s — I half expected him to claim that it would turn asandwich into a banquet. But the question he never quite gets his head around is: Jobs doing what? Americans in guaranteed government jobs “needn’t construct trains or solar panels,” he writes. Instead, they could be employed in “non-capital intensive” sectors such as “child-care, eldercare, and” — focus in here, kids — “community gardening.” Experiment: Offer for sale at a price of $250 a voucher entitling its bearer to one year’s worth of meals at McDonald’s, one year’s worth of groceries at Walmart, or one year’s worth of produce from your local community garden; compare sales figures.

Mr. Carrillo cites William F. Buckley Jr., who once recommended that welfare dependents be put to work tidying up parks. What Mr. Carrillo does not understand is that Mr. Buckley’s case was not an economic one but a moral one; he believed idleness to be a sin. (“I get satisfaction of three kinds,” he said. “One is creating something, one is being paid for it, and one is the feeling that I haven’t just been sitting on my ass all afternoon.”) Mr. Carrillo’s argument is an explicitly economic one, and it is illiterate. The economic difference between paying a man to engage in “community gardening” and paying a man to sit on his ass all afternoon is negligible, as good as the spade in the soil might be for his soul. Our food does not come from community gardens for the same reason that we do not generate our own electricity at home or build automobiles in a million mom-and-pop shops across the fruited plains.

I think this is what Cliven Bundy was trying to express with his controversial remarks.

The more removed you are from actually producing anything, the more likely you are to be a progressive.

The farther away we move from the physical economy into the manipulation of symbols through public policy, the more progressive ideas make apparent sense. And symbolism is more comfortable for progressives in general, owing to a disinclination to literally get their hands dirty. There is, for example, no environmentally clean way to produce energy, and the really productive ways of producing energy — like fracking for gas in Pennsylvania — give them the fantods. There is no environmentally clean way to build a man a house, either, or provide him with clean drinking water, or to heat that house, or to grow a crop of wheat, or to make that wheat into bread. If you think you can have health care and electric cars without steel mills and oil refineries, you are mistaken. But actually expanding physical production within our own political boundaries, for instance by building more pipelines to connect petroleum producers with petroleum refiners, scandalizes the progressives. Every smokestack is another Barad-dûr to them — even as they bemoan the loss of “good factory jobs,” the largely mythical former prevalence of which provided their political forebears with a deep bucket of solutions to throw at the problem of potentially bumptious poor people. They detest the economic use of undeveloped lands, whether for energy or timber or grazing cattle — as though beef comes from Trader Joe’s. They refuse to understand that if you want more oranges and apples, you have to plant some trees — maybe even cutting down some other trees to make room for them, or, angels and ministers of grace defend us, harassing a tortoise in the process.

 

Though there are many exceptions, the closer a man’s occupation takes him to the physical economy, the more skeptical he is of progressive central-planning ambitions. You do not meet a great many left-wing corn farmers, copper-mine operators, oil drillers, or house builders. You do meet a fair number of progressives on Wall Street and Silicon Valley and on the campus of Harvard utterly failing to teach the likes of Mr. Carrillo the fundamentals of economics, prose composition, or anything else. Follow that road to its terminus and you end up at the place in which the secret to national prosperity appears, self-evidently, to be stimulating demand, as though the nation could grow wealthier by wanting more rather than by making more, as though we could consume that which has not been produced.

What can I say? Read the whole thing again and again, and remember that two plus two equals four. No politics can change that in the slightest. You cannot just legislate prosperity.

 

 

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Who Creates the Jobs?

January 5, 2014

In an economy in which it is necessary to provide more jobs to people, everyone should agree that encouraging the people who create the jobs should be a high priority. The question is, who actually creates the jobs and what policies should be perused. There are many on the right who have argued that “rich people” create the jobs and that tax cuts for the rich are necessary to grow the economy. There is some truth to this assertion, but it is not the whole truth, as I’ll explain. Lately, liberals have retorted that it is not the rich who create the jobs, but the customers, and that policies that redistribute wealth from the rich to the middle class are necessary to provide more money for the customers to buy things. Again, there is some truth to this idea, no company can prosper unless customers buy its products. But, again, it is not the whole truth and the remedy suggested is not likely to help anyone, except the politicians.

So, who are the real job creators? The real job creators are not customers or “the rich”. The people who create the jobs are the investors, the people, rich or not, who provide the capital necessary to establish or expand a business. Customers are an important part of the process, as are the employees who create the goods or services that the company sells, nevertheless, none of the process of creating the products or the company would be possible if the capital were not available. Customers cannot buy a product that is not available or that does not yet exist. Investors provide the funds that enable a company to be established before its first sale to any customer. Investors provide the funds for research and development to create new products before customers ever decide they want to buy them.

Please note that I did not say rich people. The income or amount of wealth that an investor has is irrelevant, except that a wealthy person is more likely to possess more money to invest. A rich person who keeps all of his money in a money bin, like Scrooge McDuck is doing absolutely no good to anybody, least of all himself. A person of modest means who invests his life savings in a 401k account or even has a savings account is providing capital that will eventually be used to create jobs.

Scrooge's signature dive into money.

Rich people don’t actually do this. (Photo credit: Wikipedia)

If you want a growing economy that provides jobs for people, you must pursue policies that encourage people to invest their money to provide the capital necessary to create and expand businesses. This includes keeping taxes low, not just for the wealthy but for everybody. Taxes and regulations should not be so onerous as to make potential investors decide that it would be easier to keep their money hidden in their mattresses or send it to a tax-free account in the Cayman Islands. Punishing people who have become successful is simply not helpful. To put it another way, we don’t want policies that benefit rich people, we want policies that encourage people to become rich, and thereby benefit others.

 

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The Triumph of Capitalism

December 23, 2013

Cracked.com is a humor website that besides being funny is also surprisingly informative. You can learn all sorts of interesting facts from the writers while laughing. One recent article listed five amazing pieces of good news that nobody is reporting. News reporting usually focuses on dramatic events and these stories are happening in the background without anybody really doing anything, so they tend not to be noticed. I remain a little skeptical about number 5, we are closing in on world peace.

This one seems laughable — mankind has gone from fighting with swords, to muskets, to machine guns — right up to the modern era of poison gas and nukes that can murder every human on the planet in minutes. Mankind’s technological growth has been marked mainly by increasingly efficient ways to slaughter each other.

Sure enough, the 20th century had to have been the most violent in human history. Two world wars, conflict in Southeast Asia, constant war in the Middle East — and those were just the ones that America was directly involved in. At the beginning of the 21st century, with Afghanistan, Iraq, Libya, and rumblings of war with Syria, it seems like the world is a pack of rabid dogs about to pounce on a Snausage pinata.

The Good News:

Even with wars in Afghanistan and Iraq, the first decade of the 21st century saw the number of annual battle deaths at its lowest ever in history.

Professor Joshua Goldstein put it best: “If the world feels like a more violent place than it actually is, that’s because there’s more information about wars — not more wars themselves.” Overall, we’re in the midst of an unheard of “long peace,” as no major powers have clashed since World War II, replacing them with smaller wars that historically would count as skirmishes — the U.S. lost 3,400 soldiers in Afghanistan, which is terrible, but during the American Civil War, 4,700 troops were killed on one side of one single battle. Here it is in graph form:

Via Wsj.com
Sans screaming.

OK, so maybe this is just a temporary breather after the bloodbath that was the previous century? Nope — it’s part of a long-term trend. As crazy as it seems to suggest it, the past couple of hundred years have been the most peaceful in world history. That’s including the world wars.

Yes, in absolute numbers, more people died violently in the 20th century than in any other century — but that’s because there are so many more people now. The chances that a person living in the 20th century would die violently were about 3 percent. That’s a historically low number — it was five times higher in prehistoric societies. In tribal societies, war was a daily occurrence — just the process of everyone settling down into large-scale governments, even violent ones, was an improvement. If our hunter-gatherer ancestors could see us now, they’d be confounded by the complete lack of annual head smashing and face stabbing (if you ever unfreeze a caveman, show him our violent video games — he’ll go nuts for that shit).

And it’s not just war, it’s all violent deaths — in 14th century England, some cities had a homicide rate as high as 110 per 100,000 citizens. London’s homicide rate in 2012 was just under 1 per 100,000. And we’ve previously talked about how violent crime is dropping to historic lows, even in the gun-crazy USA. No matter how you break it down, violence is slowly going out of style.
Maybe, but they were making similar statements back in 1913 and the international situation today is frighteningly similar to the situation just before World War I.
But I am more interested in the last piece of good news they present, number one, world-wide, poverty is dropping at a shocking rate. Please excuse the language.
For decades now, we’ve watched commercials that feature some retired actor stumbling through some impoverished village in some undisclosed location to make viewers feel bad enough to donate money. Considering that we’re mired in a worldwide recession, it’s a sensible question: “Does any of this shit even make a difference?”

Yes! Even though lately it seems like the whole world is in a race to the bottom, the poorest of the poor are actually climbing out of the financial shithole. From 1990 to 2012, the number of the world’s extreme poor was cut in fucking half. In case you were wondering, that would be the first significant global decline in extreme poverty.

Ever.

Not bad, right?

And these aren’t just statistical tricks here — when they calculate this, they’re not just counting income, they account for total living conditions — infrastructure, schools, access to clean water, everything. A billion people have that stuff for the first time. And what’s really encouraging is that this all happened three years ahead of the official estimates, which pegged 2015 as the soonest such a lofty goal could be achieved.

So how did this happen? International aid helped, but the big jump has been in the increased participation of previously isolated countries in international trade. You know how people are always complaining about how “they’re shipping our jobs overseas!” Well, this is where they went — to people who previously had no jobs at all. And that boom that swept across China and India is expected to continue in places like Sierra Leone, Ethiopia, and Rwanda — all of the places you previously only heard about in the context of heart-breaking ads begging for donations. If things continue at this pace, countries like Nepal and Bangladesh would likely see extreme poverty shrink to near-nonexistent levels.

What is the cause of this amazing reduction of poverty all over the world? The expansion of international trade and also the expansion of free market economics or capitalism. No system of economics or politics made by human beings is perfect and capitalism does have its flaws. Nevertheless, the expansion of free market reforms has been responsible not just for a reduction in absolute poverty but also for the rise of a middle class throughout the developing world. Countries like India and China, where the great mass of people have known nothing but poverty and near starvation now, at least, have a chance to live with some small degree of prosperity. For the first time in human history, the obese outnumber the starving.

Yet capitalism continues to be maligned as a system that enriches the few and impoverishes the many. Why is this? Are the critics of capitalism simply ignorant of these facts? Perhaps. Or, it may be that many of the fiercest critics of capitalism prefer to see the poor stay poor. Capitalism has a way of disrupting hierarchies. In a free market; the ambitious, the inventive or the hard-working can rise. The lazy or foolish can sink, even if they belong to an old family or a special caste. It is perhaps no coincidence that the defenders of the idea that the markets must be controlled and regulated tend to be those already on top. Think of how many grandchildren of successful industrialist embrace various forms of Socialism, or how successful European firms didn’t have a problem with Fascism or Nazism, or even Democratic Socialism. The biggest supporters of Big Government tend to be Big Businesses. As long as they have a hand in setting the rules,they can set them to their advantage. And, if you advocate the redistribution of wealth, you have many opportunities of redistributing wealth and power to yourself and your cronies.

I am a defender of capitalism because I am a defender of freedom, and because I would prefer that the poor not starve. As a system defined by the free exchange of goods and services, capitalism is the only economic system that promote freedom. Other economic systems such as Socialism or Feudalism are based on the forcible taking of goods and services from those that produced them to those deemed deserving by some elite. That way lies slavery and poverty.

 

Fast Food Strike

July 30, 2013

Employees at some fast food restaurants are planning to walk off the job to demand higher wages. Read about it here at Fox News.

Workers at the nation’s best known fast-food restaurants in seven cities across America are planning to walk off the job Monday to protest what they say are wages that are too low to live on. In a move orchestrated with the help of powerful labor unions and clergy groups, the workers plan to strike for a day to demand their wages be doubled.

The Washington Post reports that the protests will take place in New York City, Chicago, Detroit, Milwaukee, St. Louis, Kansas City, and Flint, Mich., involving workers at McDonald’s, Burger King, Wendy’s and KFC. Some employees at stores including Dollar Tree, Macy’s and Victoria’s Secret are also expected to join the protesters in several cities.

The workers are calling for wages of $15 per hour, more than double New York’s current minimum wage of $7.25.

A network of local community groups, clergy and unions, including the Service Employees International Union (SEIU), are backing the strike.

“SEIU members, like all service-sector workers, are worse off when large fast-food and retail companies are able to hold down wages and push benefit standards for working people,” Mary Kay Henry, president of the Service Employees International Union, told the Washington Post.

In New York City, the protests were organized by a group called Fast Food Forward, which states its Twitter account: “No one can survive on $7.25.”

“A lot of the workers are living in poverty, you know, not being able to afford to put food on the table or take the train to work,” Fast Food Forward director Jonathan Westin told CBS New York. “The workers are striking over the fact that they can’t continue to maintain their families on the wages they’re being paid in the fast-food industry.”

The group posted a photograph on its Twitter account early Monday depicting workers who have “walked out” in New York.

Fast-food workers in New York City earn an average salary of $11,000 annually. That’s less than half of the average daily salary — $25,000 — for most fast-food restaurant CEOs. Employees in the $200 billion industry make 25 percent of the money they need to survive in New York City while working at fast-food restaurants, according to the group’s website.

I sympathize with these people. Working in a fast food restaurant is an unpleasant job and they don’t get paid what they really deserve. The trouble is that no one gets paid what is actually fair. They get paid according to how much their labor is worth. There is no shortage of people qualified to work at McDonald’s and given the present unemployment rate, I doubt that McDonald’s is having too much trouble finding people to staff its restaurants. These factors tend to keep wages low. On the other hand, it may be unfair that a corporate CEO is paid more in one day than many are paid in a year, but there are not that many people who have the skills and experience to be a CEO. If you try to pay a CEO according to what might be fair, you may find it extremely difficult to attract somebody who is actually qualified, as Ben and Jerry’s Ice Cream discovered.

Also, I don’t  about the finances or profitability of these restaurants but it may be that their profit margins are slim enough that they cannot pay their employees much more without suffering losses. Most people do not go to fast food restaurants like McDonald’s for the fine dining experience. They go because the food is cheap and fast, so places like McDonald’s cannot raise their prices by very much, or they will lose customers and money. I am afraid that if these employees force matters, they may find out the hard way that while it is difficult to live on $7.25 an hour, it is far more difficult to live on $0 per hour.

I know this might sound harsh, but we must deal with the world as it is, not as we might like it to be. The simple truth is that your employer is not obliged to pay you a “living wage”. They are only required to pay you what your labor is worth, and sometimes they don’t do even that. If you are trying to live on minimum wage, then you need to take stock of your life and decide what skills and experiences you can acquire that an employer is willing to pay a decent wage for and then figure out how you can acquire them. This is not easy. In fact, it is very difficult, but it may be the only way you can get ahead. You will never get ahead by complaining how unfair life is, or how unfair the other guy was born with more opportunities than you have had. It is unfair, but we each must make the most of what opportunities are given to us.

 

Children of the Commons

April 18, 2013

MSNBC commentator Melissa Harris-Perry‘s recent comment that we need to move away from the idea that our children are ours to the idea that children belong to the community has  proved to be more controversial than she, or anyone else at MSNBC, have anticipated, which shows that there is something terribly wrong at MSNBC.

Most conservative commentators have focused on the rather fascistic overtones of her remarks or have noted that public education is not, in fact, underfunded. I would like to tackle this subject from a different angle. I wonder if Melissa Harris-Perry is familiar with the concept of the tragedy of the commons.

The tragedy of the commons is a concept developed by Garrett Hardin in 1968. Put simply, it works something like this. Suppose there is a village in which every farmer has one cow which he grazes in the village commons. The number of cows that graze on the field is limited and the field is able to feed the cows. Now, suppose that one farmer decides to get another cow and let it graze on the common ground. He gets two cows to milk so he benefits more than his neighbors but two cows cost him no more than one. The presence of one more cow doesn’t hurt the green all that much. Then, other farmers decide to get another cow and put it on the green to graze. They get the benefits of having more cows to milk but their cost is no greater. However, as more cows are left to graze on the common field, at some point the field starts to become overgrazed and eventually what was once a fertile field becomes a barren, dusty wasteland.

The reason this happens is that while all of the farmers in the village benefit from the common field, it is no one person’s responsibility to maintain it. Each farmer gains the benefit of feeding his cows, whether he limits his number of cows or works to maintain the pasture and no one gains any extra benefit from doing the work of maintaining the field. Thus what is beneficial to each farmer individually, eventually ruins all the farmers in the village.

Garrett Hardin was an ecologist who was concerned about the problems associated with overpopulation and over use of natural resources. It is not easy to place him on any political or economic spectrum although he did favor government regulation as a means to resolve the tragedy and coercion to limit population. Environmentalists have used his analysis to justify restricting property rights for the common good. On the other hand, advocates of private property and the free market have pointed out that property and responsibility that belongs to everyone, really belongs to no one, and the best way to resolve the tragedy is through privatization of the commons. Human nature, being what it is, people are far more responsible for things that they feel personal ownership for, while common ownership property or a thing  means that no one person really feels they own it and so no one person feels really responsible for it, especially if they benefit from the use of it without the trouble of being responsible for it.

This is one of the reasons Communism didn’t work out so well. Consider Ivan, the worker at the collective farm. He didn’t own the farm, the fields or anything else at the farm. He did not benefit from the harvest and it made no difference to him if the crops rotted in the fields while he got drunk on vodka every afternoon. They weren’t his crops. They belonged to the people of the Soviet Union, so they really didn’t belong to anyone. Extend this sort of thinking over an entire national economy and you can see why there would be trouble.

With all of this in mind, we can revisit Melissa Harris-Parry’s statement that we need to get away from the idea that we personally own our children and are responsible for them and move toward an idea of community ownership of and responsibility for our children. If we make our children the responsibility of the village or the community rather than the responsibility of their parents, then the children will really be no one’s responsibility. Consider, as an extreme example to clarify matters, that there were a dystopian state that took children from their mothers at birth and raised them in institutions with trained caregivers attending to them. Does anyone truly believe that the children would be better off than if they were raised by their own parents? Melissa Harris-Perry has it backward. Children are more likely to be properly raised by parents who feel a sense of ownership and responsibility for them than by a village in which no one feels responsible for any one child. Indeed, it may be that part of the problem with public schools is precisely because they are public. No one really owns the public schools so no one is really responsible for the results of a public school education and no one feels any responsibility for spending the funding for public schools wisely.

The answer to the failure of the commons is not to create more commons but to privatize the commons as far as it is possible. If people have a stake in maintaining a continuing supply of a resource, they will see to it that the use of that resource is sustainable. It may be that the answer to the commons in education is greater privatization as a means of having the parents feel more that they are directly responsible for the state of their children’s education. In other words, we need to have more of a feeling of ownership of our children not less.

 

Ban Profits

September 6, 2012

While I am looking at political videos, here is an interesting video made by Peter Schiff. He went undercover at the Democratic National Convention posing as some sort of anti business nut.

 

To be fair, there is no way to know if the people he interviewed are representative of the people who attended, or what sort of editing he did. Most likely, he cut out the more rational responses. Still, this video shows why Democrats should never be trusted in any position at any level of government. I would go so far as to suggest that the clowns in this video are too ignorant to be allowed to vote. Do these idiots have any idea how an economy actually works? Do they seriously think that the companies that provide them with the things they need would, or could continue to operate if they weren’t allowed to make a profit? I doubt they think much at all.

“China Should Cap Foreign Exchange Reserves”

April 25, 2011

Uh-oh. From Xinhua news we get this:

BEIJING, April 23 (Xinhua) — China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.

The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

China’s foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March.

Tang’s remarks echoed the stance of Zhou Xiaochuan, governor of China’s central bank, who said on Monday that China’s foreign exchange reserves “exceed our reasonable requirement” and that the government should upgrade and diversify its foreign exchange management using the excessive reserves.

Meanwhile, Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically, using them to acquire resources and technology needed for the real economy.

Tang also said that China should further diversify its foreign exchange holdings. He suggested five channels for using the reserves, including replenishing state-owned capital in key sectors and enterprises, purchasing strategic resources, expanding overseas investment, issuing foreign bonds and improving national welfare in areas like education and health.

The Chinese have good reason to be worried about their foreign exchange holdings, especially the dollar. They may be in a lot of trouble of the dollar collapses because we can’t get serious about spending.

Is Gold the New Black? States Look to Bring Gold Standard Back

April 15, 2011

I’m not at all sure this is a good sign.

Starting in May, Utah residents will be able to shop in a currency other than the dollargold, something that hasn’t happened since 1933.

Utah became the first U.S. state last month to recognize gold and silver coins minted by the federal government as legal tender. More than a dozen other states are considering similar measures, and are expected to follow Utah’s example. The move, proponents say, is caused by declining faith in the U.S. monetary system and concern about rising inflation.

It’s not like they going to start carrying around gold coins. Rather the dollar will be backed by gold and can be converted if desired. I may not know enough to be sure, but, by itself, I don’t think this is a bad idea. At present, the dollar, and really no currency, is not backed by anything tangible. A dollar is worth a dollar because the government says so. But, this news is worrisome because it shows that some people are losing faith in the dollar and anticipate higher inflation. Half of economics is psychology, what people think is going to happen, and fears of inflation could become a self-fulfilling prophecy.


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